OPPOSITION spokesman on energy Phillip Paulwell is urging the Government to urgently seek clarity from the United States Government on the executive order it issued in August, which imposed sanctions on Venezuela that are now affecting the operations of Jamaica’s oil refinery Petrojam Limited.

So far, the sanctions have cost the Jamaican Government $12.6 billion, or 14 per cent of what it is spending on public debt.

The executive order has caused primary financiers of lines of credit for Petrojam, such as North America’s Citibank, and intermediaries like Latin American bank Bladex, to tighten up on restrictions and due-diligence procedures, making it tough for the refinery to access funds to purchase its products.

This new paradigm has led to a number of problems for Petrojam, including disruptions and delays in transactions and various loan agreements due to the Venezuelan Government being withheld by the US Federal Reserve Bank.

Energy Minister Dr Andrew Wheatley, in a statement to the House of Representatives on November 14, said those funds have since been released.

But this week, fresh concerns surfaced at the Public Administration and Appropriations Committee (PAAC) when it was noted that $12.6 billion (US$100 million) of Jamaica’s public debt stock represents a loan to Petrojam, to back up its cash flows.

The funds are to be used for working capital support.

Deputy financial secretary in the Public Expenditure Division of the Ministry of Finance Lorris Jarrett noted: “This is the Government’s response to ensure that Petrojam doesn’t suffer any severe impact on its operations.”

The sanction affects PDVCaribe, a subsidiary of Petróleos de Venezuela (PDVSA), which owns 49 per cent of Petrojam Limited.

Acting deputy financial secretary in the ministry’s Public Enterprise Division, Carlene O’Connor explained that “Citibank has become very cautious, so there is a restriction on Petrojam’s ability to utilise these facilities. What Petrojam has been doing is to utilise its cash resources to pay for products that it purchases”.

However, she noted that Petrojam, at the moment, purchases its products on the spot market from countries such as Mexico, not Venezuela.

“I find it curious because PDVSA has not been supplying products to the refinery so why would there be a restriction on Petrojam in the utilisation of these facilities in the spot market purchases?” Paulwell questioned.

O’Connor explained further that the sanctions have to do specifically with PDVSA’s ownership share in Petrojam.

“That is what Citibank is looking at specifically — any reflow to PDVSA through the ownership structure,” she said.

Paulwell argued that while the country has not yet begun to feel the impact of the restrictions, the Ministry of Foreign Affairs needs to move swiftly before the economic fallout begins.

“How can you penalise an arrangement that existed long before the sanction? It really is a stretch and a severe blow to Jamaica if this were not to be contended with. It is time for the Ministry of Foreign Affairs to get urgent clarification, because then any foreign country can impose sanctions on others that will create serious economic harm for countries that have had relationships before (the sanctions),” he said.

Dr Wheatley told the House of Representatives last month that Jamaica is making the case that long-term arrangements, which precede the executive order should be outside the scope of the new order, and that Petrojam is a public company registered in Jamaica and controlled by the Government of Jamaica, and not by the Venezuelan Government.